Talks will resume virtually. (representative)
Karachi, Pakistan:
Pakistan and the International Monetary Fund will resume online talks next week after 10 days of face-to-face discussions in Islamabad on how to keep the country afloat failed to reach an agreement, the IMF said on Friday.
With the nuclear-armed nation in full-blown economic crisis, IMF talks aim to free up at least $1.1 billion in stalled funds as part of a $6.5 billion rescue package signed in 2019.
Finance Minister Ishakhdar told reporters that Pakistan had agreed with the IMF on the conditions for the release of the funds, which had been delayed since December.
He added that talks would actually resume on Monday, citing the delayed “routine procedure”. “We’re going to implement whatever agreement we have between our teams,” Dahl said.
Nathan Porter, head of Pakistan’s IMF mission, confirmed in a statement that negotiations are continuing and that considerable progress has been made. That’s despite the positioning causing prices of the country’s government bonds to plunge again.
Pakistan desperately needs to succeed. The $350 billion economy is still reeling from devastating floods last year, with the government estimating that rebuilding efforts will cost $16 billion.
The heavily indebted country has just enough foreign exchange reserves to pay for less than three weeks of vital imports. The longer it takes to make IMF payments, the higher the risk of default, especially as elections loom, analysts said.
Last week, Prime Minister Shahbaz Sharif called Pakistan’s economic situation “unimaginable”.
“Ideally, Pakistan should have a staff-level agreement at the end of the IMF mandate,” Khaqan Najeeb, a former finance ministry adviser, told Reuters.
“Delay is untenable.”
IMF measures
The so-called staff-level agreement must be reached before the funds can be disbursed, which then needs to be approved by the IMF’s Washington headquarters.
In addition to the stalled appropriations, there is $1.4 billion remaining in the $6.5 billion rescue package, which is due to end in June.
Experts say Pakistan needs to pay quickly. “If this continues for, say, more than a month, things will become more difficult as our reserves reach a critical level,” former central bank deputy governor Murtaza Syed told Reuters.
Conditions set by the IMF include a return to a market-based exchange rate and higher fuel prices, measures recently implemented in Pakistan have already sent inflation to record highs – up 27.5 percent year-on-year in January – and created shortages in some regions Imported Products.
Dar said Pakistan also agreed with the IMF to take fiscal measures, including new taxes.
Analysts worry that more fiscal tightening could push the economy further into crisis.
“Not only did the government waste more than five months before realizing the seriousness of the situation, it is also sleepwalking the country into an economic abyss,” said Sakib Sherani, who was chief economic adviser to the finance ministry in 2009-10.
(Aside from the title, this story is unedited by NDTV staff and published via a syndicated feed.)
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